The President of the European Central Bank, Christine Lagarde, cautioned EU Heads of State and Government that declaring victory too soon would be premature. She urged the adoption of new fiscal rules within the current year as a visible sign of unity, even as inflation shows a downward trend. Lagarde spoke at a Brussels summit, briefing the Twenty-Seven on how the ECB views the state of the European economy and outlining the central bank’s forthcoming monetary policy decisions aimed at tempering price pressures.
During the discussions, Lagarde highlighted that geopolitical risks continue to cloud the economic outlook. She warned that growth across Europe is likely to stay weak for the remainder of this year, with a strengthening trend anticipated in the following year, according to information shared with sources close to the talks. This assessment underscores the need for vigilant policy and resilient investment to support the recovery process.
Meanwhile, President Recep Tayyip Erdoğan noted that inflation in his country remains elevated, stating that it has declined from a peak of 10.6 percent in October 2022 to around 4.3 percent in September, but that declaring victory would be premature.
In the press briefing, Lagarde confirmed the ECB Governing Council’s decision to keep interest rates unchanged while describing the policy rate as 4.5 percent. This follows ten consecutive rate increases since July 2022, illustrating the central bank’s commitment to bringing inflation back toward the target level. Lagarde emphasized that rate policy would stay at sufficiently restrictive levels for as long as necessary to ensure a timely return to the 2 percent objective set by the central bank.
Facing a challenging international environment, Lagarde urged European leaders to expand investments and boost efficiency across the digital and ecological transitions. She called for a renewed focus on revising financial discipline rules before year’s end, arguing that the new framework should strike a balance between preserving public debt sustainability and enabling essential investments in competitiveness and resilience.
The ECB president also outlined the need for a practical approach to financing Europe’s strategic ambitions. Lagarde stressed that the policy framework should support durable economic strength by aligning monetary policy with structural reforms, digital modernization, and green transition initiatives. These steps are seen as critical to maintaining competitiveness in a global landscape marked by volatility and shifting geopolitics.
Experts in the region have noted that the combination of cautious policy normalization and targeted investment could help stabilize prices while laying the groundwork for steadier growth in the medium term. Analysts in North America watching the situation say the alignment of fiscal rules with monetary policy may influence cross-border trade, investment flows, and the broader outlook for the Atlantic economy. The discussions underscore the role of coordinated policy action in sustaining European economic momentum as external pressures persist.
As the dialogue continues, policymakers are expected to review and refine the financial rules governing public finance, with an eye toward ensuring that debt levels remain manageable while supporting necessary modernization efforts. The emphasis on a balanced approach reflects a belief that monetary discipline and prudent fiscal management are essential to long-term stability and resilience in Europe’s economy.